shares are on a tear—up 8% this week, 13% over the past six trading days and 37% for the year to date.
And Friday was more of the same: Shares of Oracle (ticker: ORCL) jumped 2.5%, to $87.76, a new closing high. For the first time, the enterprise software company is approaching a $250 billion market cap.
For the rally, give partial credit to the Pentagon.
The Defense Department on Tuesday canceled its 10-year, $10 billion JEDI cloud computing contract with
(MSFT), which both Oracle and
(AMZN) had been relentlessly challenging in court. And DoD is launching a new, replacement project that Oracle might be able to bid on.
Oracle is shifting a growing portion of its database and application business to the cloud, as Barron’s reported in February. The shift has set the stage for a re-acceleration of top-line growth. A few weeks ago, Oracle reported May quarter financial results that showed 8% top-line growth, the biggest increase in a decade.
Still, Oracle Cloud remains far behind Amazon Web Services, Microsoft Azure, and Google Cloud, the giants in the growing public cloud services market. But being a Pentagon player would change that.
The Defense Department’s new project, called the Joint Warfighter Cloud Capability, will be what the agency describes as a “multi-cloud/multi-vendor” contract. The government said it would seek proposals from “a limited number of sources,” noting that only Microsoft and Amazon appear to meet the department’s requirements.
But—and this is a big but—the department also said it would “immediately engage with industry” and continue research to determine whether any other U.S.-based cloud players can also meet the requirements. “If so, the Department will also negotiate with those companies,” the agency said.
And therein lies a ray of hope for Oracle, which has been saying for years that its own cloud meets the government’s technical requirements. CEO
told reporters in Israel recently that she talked to the Pentagon’s IT staff after Tuesday’s announcement, and that “there is readiness to look at the matter anew.”
While a partial win for Oracle on the new contract might not move the needle much in terms of top-line growth, it certainly would be a huge statement of the company’s ability to compete with AWS and Azure. And while it hasn’t happened yet—it’s not even clear that Oracle really does meet all of the DoD requirements for the work—investors appear intrigued.
Write to Eric J. Savitz at [email protected]